Bankruptcy Has Its Advantages

A new poll says Chapter 11 gives companies an advantage over solvent competitors.
Helen ShawMay 1, 2006

Companies operating under Chapter 11 protection enjoy an unfair competitive advantage, says a new online poll conducted by the American Bankruptcy Institute.

More than half (57 percent) of the 206 respondents claimed that bankrupt companies hold a competitive edge—with 31 percent of those polled saying they somewhat agree with the statement, and the remaining 26 percent admitting that they strongly agree.

Meanwhile, 35 percent of the respondents thought the opposite. In fact, 19 percent disagree “somewhat” with the statement that Chapter 11 protection provides a competitive edge, while those who disagree strongly totaled 16 percent. Approximately 8 percent of respondents did not have an opinion, or did not know enough about the issue to submit an opinion.

Companies that operate under Chapter 11 of the Bankruptcy Code reorganize the business in an attempt to become profitable again. In such a situation, management continues to oversee the daily operations while a bankruptcy court has final say on significant decisions.

The American Bankruptcy Institute Quick Poll is posted on the organization’s home page to gauge responses on current bankruptcy issues.